Estonia

According to Merchant Machine, 88% of Estonians had access to the internet in 2021. Of all Estonian citizens using the internet, 89% use the internet for online banking, which is 13% above the EU average. Additionally, Estonia ranks 15th in the integration of digital technologies and first for digital public services among EU countries.  

Estonia falls under the PSD2 legislation and has adopted Berlin Group’s NextGenPSD2 standard. PSD2 is a European Directive that regulates electronic payment services and was implemented in all EEA countries in 2016 and went live in September 2019. 

In their European Open Banking league, Yapily ranked Estonia 15 out of 18. Estonia has been trying to bring in a lot of foreign investment since Brexit; hence they have invested in developing a fertile regulatory environment for foreign firms. Open Banking has been one of the selling points/central areas of attention for regulators there. However, despite sharing a number of banks with many of the Baltic/Nordic regions, implementations vary, making connectivity slightly more tricky. Regulators should mandate a set of common technical standards that are more similar to the ones used around the EU. Nonetheless, Estonia shows promise for Open Banking due to an advanced digital ecosystem, high levels of consumer trust, and the second-largest number of Third-Party Providers (TPPs) in the Baltic states.

Even though Open Banking authorisation is relatively streamlined in Estonia, Yapily states that the authorities should focus on ensuring that firms meet the legal requirements once authorised and enforce against poor quality API performance. Overall, Estonia scores well in bank integration and API customer support. However, a lack of consistency across the largest banks and frequent periods of downtime can make it difficult for Third-Party Providers (TPPs) to integrate. Yapily states that Estonia should continue to focus on local regulatory oversight and API standardisation to accelerate its Open Banking ecosystem.

The EU Commission has announced its intention to adopt an Open Finance regulatory framework.

Majority of Estonians use eID. The financial sector would benefit from using national e-IDs and e-signatures for Know Your Customer (KYC) purposes and from the secure transmission of original documents for customer due diligence. 

The legal framework already supports interoperability across Europe. The financial sector can use it, but would need to decide collectively how to make it work in practice. Estonians are expected to able to use their national e-ID and e-signature to access digital financial and payment services outside of Estonia as well in the near future.

According to The Global Findex Database, 99% of Estonian adults had bank accounts in 2021.

99% of financial transactions already occur digitally, 98% of prescriptions are prescribed online and 98% of tax declarations are conducted online  in Estonia, which indicated that Estonian consumers have high digital-adoption rates.

As part of Estonia’s mission to become ‘the world’s most advanced digital society’, the government established the e-Estonia program in 1996. In 2014, Estonia launched e-residency program. In addition, the Estonian government has even launched an e-Residency marketplace, which provides information about selected banking, blockchain, crypto and insurance firms in the country, to help other firms select the right vendors. 

The emergence of Estonia as a Fintech hub means the country’s regulatory environment is of interest beyond its borders, and it could have implications for the growth of the Fintech sector, particularly crypto firms, as well as other digital disruptors across Europe.

More than 80 Fintechs operate in Estonia. Estonia is a cashless society, with over 99% of financial transactions occurring digitally. Electronic ID and Blockchain are widely used in Fintech applications.

Estonia ranks 8th in human capital among EU countries in the Digital Economy and Society Index (DESI) 2022. The human capital measures digital skills, the proportion of employed people working as ICT specialists, female ICT specialists, and enterprises offering ICT training.

Estonian businesses will soon be able to apply for guidance through a regulatory sandbox to help them use and develop artificial intelligence tools in a data protection-compliant way, the country’s privacy watchdog said.

Estonia has adopted the Berlin Group’s NextGenPSD2 technical standard.